Trading in shares of AMC Entertainment Holdings was restricted to several trading platforms yesterday, but the company took advantage of the sudden popularity this week to give extra financial boost and be better prepared for the recovery in US consumer spending.
The multinational theater company has had a difficult year due to the coronavirus pandemic. Some movies have switched their debut from more than 1,000 theaters to streaming platforms such as Netflix and HBO. Others postponed their premiere. AMC discontinued U.S. operations between March and August, and then limited seating capacity after the opening of some of its theaters. During the last quarter ending September 30, revenue fell more than 90% to $ 119.5 million from $ 1.3 billion; and its net loss soared to $ 905.8 million, an increase of 851% over the same period in 2019. Its poor financial performance was the reason why AMC became one of the shortest companies in the US.
Earlier this week, AMC President and CEO Adam Aron said: “Any talk of a looming bankruptcy for AMC is completely off the table.”
A few things made this sunny view possible. After AMC focused on the stock market through a Reddit forum, the stock price rose 300% on January 27th. On January 28, many retail brokers restricted trading in AMC shares. The trading platforms Robinhood and E * Trade temporarily restricted AMC’s trading yesterday; while Charles Schwab and TD Ameritrade added requirements for certain trading options.
With a market value of nearly $ 3 billion today, AMC and the owners of its debt took advantage of the increased share price this week. On January 25, the company announced that it had raised $ 506 million in equity and another $ 411 million in debt. The added liquidity “would enable the company to make it through the dark coronavirus winter,” AMC said. The same day, he launched a new offering to sell up to 50 million additional shares.
After two days, AMC announced that it was selling all the new shares, plus 13.3 million other shares from a previously announced share sale. The proceeds amount to $ 304.8 million.
In addition, a group of lenders decided to exchange $ 600 million in loans for shares in the company. For AMC, this means no more interest and no more payments. For Silver Lake, the private equity firm and the main lender, it no longer means concern about AMC’s ability to repay, but only the price of AMC’s shares, which if Redditors have anything to do with it, will continue to rise.
Five days ago, AMC’s operations were serious enough to warn investors that they might not exist much longer. Now that its financial runway has been extended by more than a billion dollars, AMC may take more time to negotiate with theater landlords on how it will pay arrears and future rent payments; and with studios on the release of films.
Even with the recent investment interest, experts are still concerned about whether AMC’s business model can ever return to the success level of pre-pandemic. “For businesses like AMC that rely on people in large numbers and close quarters together, I think it will remain a difficult proposition for the foreseeable future for some time to come,” said Yung-Yu Ma, chief investment officer at BMO Wealth. . Management.